Footnote:
In: Journal of International Accounting, Auditing and Taxation
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 18, 2022 erstellt
Description:
We analyze the effect of macroeconomic instability on earnings management and the moderating role of country-level institutions, explicitly examining how this phenomenon compares between developed and emerging market countries. Focusing our analysis on macroeconomic instability instead of specific periods of financial crisis, we provide a more comprehensive view of the role played by the macroeconomic environment as a key determinant of accounting quality. The empirical study relies on a worldwide sample from 34 countries throughout the period 1998-2018. Based on several variables related to macroeconomic environment conditions, we construct a comprehensive macroeconomic instability index for each country allowing for changes over the years. Our findings suggest that when facing greater macroeconomic instability, firms from developed (emerging market) countries decrease (increase) the level of accruals-based earnings management, and both types of countries decrease the level of real earnings management. We also find evidence that the association between macroeconomic instability and accruals-based earnings management is lower in countries with stronger institutions, in both developed and emerging market countries